VeriSign, ICANN Sued Over .com

There are a lot of ways to get an international meeting of constituents noticed, but the Internet Corporation for Assigned Names and Numbers (ICANN) probably doesn't consider lawsuits one of them.

ICANN and .com registry operator VeriSign discovered that they were the subject of two federal lawsuits filed Monday alleging price-fixing and antitrust activities related to a proposed agreement regarding .com and the existing .net contract.

The World Association of Domain Name Developers (WADND) and the Coalition for ICANN Transparency (CFIT) filed their suits on the first day of ICANN's thrice-annual public meetings that run throughout the week.

WADND, a trade organization that helps Web site owners reap the most revenue from ads and traffic, alleges the two organizations conspired to remove all price controls at VeriSign for .net registrations, lock in price increases for .com registrations and permanently secure VeriSign's monopoly of the two domain extensions.

"ICANN and VeriSign are trying to take advantage of the lack of government oversight to line their pockets at the expense of consumers," Patrick Cathcart, the attorney representing the WADND suit, said in a statement.

"This agreement guarantees annual price increases at double the rate of inflation while permanently fixing the price of registering any .com or .net domain name far above what a free market would otherwise bear."

ICANN officials downplayed the lawsuits in a statement saying they appear to be an effort to divert discussions during the ICANN meeting to issues raised by a specific industry sector.

"The groups involved in the lawsuits are seeking to stop the introduction of competing services in the market for deleted domain names," the statement read. "In recent years, some companies have sought to exploit the value of some expired domain names beyond the base registration price offered by VeriSign to registrars.

The proposed .com agreement could prove costly to Internet users and is a departure from other contracts between ICANN and the registry operators. Where other agreements range between a fixed $4.25 and $6 fee for domain registrations, the proposed .com agreement lets VeriSign charge up to 7 percent more every year.

Critics argue that putting .com up for a competitive re-bid would force VeriSign to charge domain-name fees more in line with current contracts, rather than successively hiking the rates.

The .net contract between ICANN and VeriSign, which was put up for a competitive re-bid and won by VeriSign this year, put a fixed $4.25 fixed fee in place until Jan. 1, 2007.

ICANN officials say the wording of the 2001 .com agreement with VeriSign, unlike the contracts for .net and .org, contains a clause that allows for automatic renewal when the contract expires in 2007.

To an extent that's true, but, according to the contract, ICANN can put the contract up for competitive re-bid if they find VeriSign doesn't meet four requirements, one of which is if they are found in material breach of its agreement.

Similar to WADND, CFIT seeks to prohibit the signing of the proposed agreement, wait until the existing contract ends and put it up for a competitive re-bid. The suit asks the court to order VeriSign divest its registry business as a separate company and abide with measures that keep the market place competitive.

CFIT's lead attorney in the suit, Jesse Markham, also stated that VeriSign should be prevented from expanding its monopoly control into highly competitive downstream and adjacent markets.

"ICANN has vacated its government-mandated obligation to maintain competition and prevent discrimination in markets related to Internet domain names by succumbing to VeriSign's strong-arm tactic and allowing it to leverage its limited-during contractual control over .com and .net into a permanent control over those registries and over adjacent market segments for various domain name services," Markham said in a statement.

Tom Galvin, a VeriSign spokesman, said the lawsuit brought by CFIT is another attempt to use the guise of ICANN reform to further the ends of its represented companies. Specifically, the lawsuit seeks to block the use of the Central Listing Service (CLS) for expiring domain names.

The CLS is a modification to the highly controversial Wait Listing Service (WLS) introduced in 2002 by VeriSign. Registrars who sign a CLS service agreement with VeriSign can take part in a five-day auction for expired .com and .net domain names

Under WLS, VeriSign would maintain a single backorder list of soon-to-be-expiring domain names on a first-come, first-served basis, cutting out registrars and companies that make money on grabbing expiring domain names for its customers.

One of those companies affected by WLS was Pool.com, one of four organizations represented on CFIT's board of directors. Momentous.ca, Pool.com's parent company, is also on the board, as well as lobbying firm Trammell & Co. and WADND.

"This lawsuit is an effort by Pool.com to hijack the VeriSign and ICANN settlement discussions and block a proposed new service, supported by other registrars, that would benefit Internet users," Galvin said.

"CLS is widely supported by registrars. Unfortunately, Pool.com is once again trying to use the court under the guise of ICANN reform, to stop a proposed beneficial new service from coming to market."

Galvin's statements were echoed by Jonathan Zuck, president of the Association for Competitive Technology (of which VeriSign is a member), who stated the CFIT suit seems more intent on preventing competition than improving ICANN transparency.

"Instead, this lawsuit and this coalition seem to be focused entirely on the protectionist goals of Momentous," he said in a statement. "Momentous does not want to see VeriSign implement innovations that will enable other registrars to compete with its Pool.com wait list service for expired domains. We are confident that the judge will see through the rhetoric of CFIT and dismiss this disingenuous lawsuit."